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Home / Business / Instant view – BOJ takes action to make policy flexible and promises to keep interest rates low

Instant view – BOJ takes action to make policy flexible and promises to keep interest rates low



TOKYO (Reuters) – The Bank of Japan has taken steps to make its massive stimulus plan more flexible, promising to keep interest rates low for the time being on Tuesday, reflecting its forecast that the inflation rate needs its time to target.

FILE PHOTO: A Japanese flag flutters at the Bank of Japan's building in Tokyo, Japan, March 1

5, 2016. REUTERS / Toru Hanai / Free Photo

NOBUYASU ATAGO, CHEF ECONOMY, OKASAN SECURITIES, TOKYO

Today's decision should improve the sustainability of BOJ's massive easing as part of its policy approached a limit.

"The reduction in current account accounts to which negative interest rates apply was a smart move."

"That should help Japan Post Bank and other financial institutions.

"However, this should not be seen as a step backwards in the BOJ's negative interest rate policy, the nice thing is that the BOJ can still keep short-term interest rates at a negative level."

IZURU KATO, CHEF ECONOMIST, TOTAN RESEARCH

"There were no major changes in policy, but the bulk of the policy announcement was the BOJ's response to a decline in market function."

"We can say that this is a step towards normalizing monetary policy, but it was a fine adjustment and the BOJ is expected to maintain the existing policy framework.

"Given the impact of the VAT hike, the BoJ is unlikely to increase its policy rate by 2020, and it is assumed that the benchmark rate for the 10-year bond yield will remain unchanged."

NAOMI MUGURUMA, OLDER MARKET ECONOMIST AT MITSUBISHI UFJ MORGAN STANLEY SECURITIES

"With forward-looking leadership, the BOJ showed its commitment for a prolonged period of extremely low interest rates."

"The central bank has clearly seen the changes of that time from signs of future tightening Differences in interest rates.

"The yen weakened, futures on Japanese bonds eased and stocks rose slightly as a result of weakening excessive market expectations for higher interest rates, and in this sense, the BoJ is making initial progress in sending market signals to its political intentions.

"The BOJ, however, remains in a tight spot as it tries to control bond yields while being able to move more flexibly. This means that the Financial Market Bureau owes a lot of homework to the BOJ. "

RODRIGO CATRIL, STRATEGY OF THE STATE FX, NATIONAL AUSTRALIA BANK, SYDNEY

" The Bank of Japan has not officially changed its policy, and there is an obligation to keep the simple policy longer.

"The big question of the moment, however, is what its intent of flexibility is about the 10-year target of zero At this point, it's very unclear what they mean by raising long-term interest rates up and down. This is as vague as it can be, and the proof will be how they react in open market operations It will be interesting to see them increase the 10-year JGB rates This will set a tone for the market.

"Then the big question would be to what extent the BOJ will buy JGB. Your guidance of 80 trillion, as we know, was just a guideline since the Yield curve control was introduced. They bought much slower. From a loosening perspective, they have essentially rejuvenated. As the new policy weakens, the question arises of how the market reacts. But that remains to be seen.

"We need to see what Kuroda says, which will help us understand what the flexibility means, and the market is definitely cautious at this point, hopefully we'll get some more clarity when Kuroda speaks later today." [NICKTWIDALEANALYSTRAKUTENSECURITIESAUSTRALIASYDNEY

"The market is a little disappointed, I think there is some inclination that USD / JPY will rise to 112.50 in the short term, and then try 113 What we were looking for was some degree of clarity about YCC control, which is what the market has hinted at, and we have half of what was expected, as we have the USD / JPY price of 113 to 111, I think there is a tendency to trace it back.

"We brought the news to the market and it came a week ago, we had the reaction to it. Now they have come through and give a bit more clarity. I think it was a pretty smooth operation, they did a good job in that respect.

"Some people refer to stealth tapering, and I think that's an important factor, which could lead to an appreciation of the yen over the medium term."

HIROAKI MUTOU, CHEFÖKONOMIST, TOKAI TOKYO RESEARCH INSTITUTE

"It is a very mild policy change by the BOJ, but its political vector is moving towards streamlining.The BOJ's message was to make long-term returns higher.

"I think the BOJ's political system does not strengthen the markets has optimized, but has introduced an instrument, forward guidance for policy rates, for future streamlining.

"The BOJ will be able to send a subtle message to the markets, adapting their words to key interest rates in the future."

coverage by Kaori Kaneko, Hideyuki Sano, Tetsushi Kajimoto in Tokyo and Swati Pandey in Sydney; Edited by Chris Gallagher

Our standards: The Thomson Reuters Trust Principles.

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